The U.S. energy picture has shifted dramatically in recent years. The country is currently enjoying booming domestic energy production from multiple sources. And yet, signs of uncertainty abound, especially with mounting climate risks and some energy sectors thriving more than others.

We will be watching President Obama's State of the Union address on Tuesday to hear the approach that the administration will take on energy and climate. The policy decisions that the administration makes will set the stage for 2014 and resonate for years to come.

1. NEW EPA RULES FOR THE POWER SECTOR

One of the most significant actions this year is how the US Environmental Protection Agency (EPA) will proceed with standards to control greenhouse gas emissions from existing power plants. June 1 marks the deadline for EPA to announce its proposal. (It published proposed standards for new power plants earlier this month.)

According to WRI’s analysis, reducing emissions from the U.S. power sector is a key step toward meeting the U.S. commitment of reducing emissions by 17 percent below 2005 levels by 2020. The design and stringency of the power sector rules will provide a strong indication of whether the U.S. can meet this international commitment.

The important questions for 2014 are: How ambitious and flexible will the standards be? And what other steps will the Obama administration take to address U.S. power sector emissions?

2. LIQUID NATURAL GAS EXPORTS

Natural gas is the world’s fastest-growing fossil fuel, with consumption expected to increase by 64% by 2040. Natural gas is a boon for the U.S. economy, but it carries nontrivial environmental risks, especially due to the risk of fugitive methane emissions.

The U.S. Energy Information Administration (EIA) forecasts that liquid natural gas (or LNG) trade may more than double in the next quarter century. This has sparked a rush to convert former import terminals in the U.S. into export facilities that could respond to international demand for natural gas.

Last year, three LNG export projects were permitted to move ahead, and there are at least 16 additional applications pending.

The questions are: How many of those applications will be approved and how quickly will the export terminals come online? How will the administration balance rising interest in LNG exports with the inherent environmental risks?

3. PRESSURE ON COAL

Booming natural gas supply is just one of several factors putting pressure on coal plants. According to the EIA, coal consumption is expected to grow slowly in the U.S. 2014 and then decline by 2.6% in 2015.

Morevoer, coal exports are expected to decline in 2014, due to a sluggish European economy and reduced Asian demand.

But, coal powered electricity is still in demand around the world. In fact, WRI found that there are nearly 1,200 new coal-fired plants proposed globally (as of July 2012). And, at least one study found that coal will surpass oil as the key fuel for the global economy by 2020.

The questions are: Will multiple pressures put downward pressure on U.S. coal? Or will growing global demand lead to an increase in national coal production and exports?

4. RENEWABLE ENERGY RISING

Despite declines in overall investment in 2013, prospects for renewables are looking up in 2014. The Climate Action Plan, announced by President Obama last June, proposes to double renewable energy in the United States by 2020 and open public lands for enough clean energy development to power more than 6 million homes.

The medium-term outlook is sunny for solar energy in particular, with declining prices and a growing number of homeowners and businesses putting panels on their roofs. Many of these homeowners are already saving money on their electricity bills. In addition, a new report today finds that solar industry employed more than 142,000 people in 2013, and jobs in the sector have grown by 20% since September 2014.

But rising demand for solar has also led to tension with some electric utilities, who feel that solar customers should pay their fair share of the cost to maintain the electric grid.

Several states are experimenting with new pricing structures for rooftop solar and other distributed generation. Minnesota has introduced a new approach, known as the “value of solar” method, which offers credits to consumers who sell solar power energy into the grid. The Minnesota Legislature also included economic costs associated with climate change in the “solar value.” (Read more about the plan, as reported by E&E News.) In Arizona, meanwhile, a regulatory dispute resulted in a decision to charge roof-top solar owners with a $.70 per kilowatt fee in order to support utilities that are losing revenue due to the rapid expansion of solar in the state. The settlement could have implications for how the renewable energy debate plays out in many other states.

The question are: Will renewables become more cost competitive? Will federal and state governments offer more incentives to expand renewable energy production in 2014? Will utilities increasingly charge fees for households that install rooftop solar or other distributed generation technologies?

5. INTERNATIONAL CLIMATE ACTION ON THE RISE

Next year, 2015, is expected to be a pivotal one for international climate change as countries are on course to forge a new international climate deal. But, in order to get there, significant progress needs to be made this year.

Two new scientific reports from the Intergovernmental Panel on Climate Change. , will be released this spring that will present analysis about climate impacts and potential policy responses. In June, Risky Business, a new economic study of the financial risks of climate change, led by Michael Bloomberg, Tom Steyer, and Hank Paulson, will be released. In September, another economic report, led by the Global Commission for the Economy and Climate, will look at the economic costs and benefits of climate action. (WRI is one of seven institutes that are conducting analysis.)

These reports will come just ahead of UN Secretary General’s climate summit in September, which could prove to be a critical moment for international climate action. Leaders from all major economies are expected to attend the summit and lay out clear commitments their governments will make to tackle climate change.

The questions are: How will heads of state respond? Will the U.S. and other countries be ambitious in the commitments they put forward?

CONCLUSION

The U.S. energy picture is highly dynamic. But, the country has a choice: continue with a system that depends heavily on high-carbon fossil fuels, or move toward an approach that drives innovation and reduces climate threats.

We will be listening to hear what actions and signals President Obama sends in his State of the Union address. We believe it’s time for the administration to lay down an unequivocal signal that it’s ready to embrace a low-carbon, clean energy future.